NEW DELHI: Looking to boost corporate sentiment, Finance Minister Arun Jaitley is expected to do away with retrospective taxation in the Budget 2014, reported ET Now. According to ET Now, the Finance Ministry is considering doing away with the retrospective amendment of Section 9.

In Budget 2012, the then Finance Minister Pranab Mukherjee had introduced the retrospective clause, a move that had spooked global investors. ET Now Sources in the North Block said, "Finance minister is likely to make this retrospective clause prospective."

Section 9 of the Income Tax Act deals with tax on offshore mergers and acquisitions with assets in India. This will continue, but it will only be applicable in prospective nature, ET Now said.

"The only trouble is the fact that there are ongoing litigations like Vodafone, Nokia, Sanofi-Aventis," ET Now said. "Existing litigations will be allowed to continue, while a few of them will be referred to Settlement Commission," ET Now said. "The Settlement Commission will look for an amicable way of settling the existing litigations," it added.

The 2012-13 budget amendment that overturned a Supreme Court judgment in the Vodafone tax case has been singled out for undermining investor sentiment and was often cited as an example of India's aggressive tax regime.

The retrospective amendment was clarificatory in nature that said any foreign transaction that resulted in direct or indirect transfer of an asset located in India was liable to tax in the country.

The only hitch in making the law prospective is that the BJP had not opposed the amendment when the budget for 2012-13 was passed, but government officials said the move could be justified in the larger interest of an economy that needs foreign capital to fund the creation of infrastructure and finance the current account deficit.

"This needs to go... It has created huge uncertainty for foreign investors," said a senior government officia to ET earlier this month. The final decision will be taken by finance minister Arun Jaitley. He has, in the past, been known to oppose any retrospective changes in law but it remains to be seen what position the government takes on the issue.